Top 5 landlord buy-to-let mistakes

By Josh Hall

The buy-to-let boom resulted in many people becoming landlords and
investors in the belief that it was an easy way to make some quick cash.
Buy a property, rent it out, collect the cash – what could possibly go
wrong?

In reality, the life of a
landlord
can be difficult. Financial pressures, demanding tenants and the eternal
problems associated with finding and managing the perfect buy-to-let
property
can all conspire to create a high-stress occupation. If you are a new
landlord, one of the best ways to learn the ropes is to look at the
problems suffered by other investors, and consider how you can avoid
them.

So what are some of the most common mistakes made by landlords?

Not vetting tenants

Your tenants are the bedrock of your business. They are your customers;
it is their rent on which you rely to ensure that you can pay your buy-to-let mortgage and meet your other outgoings.

At the same time, you place a significant amount of trust in your
tenants.
You must be confident that they will treat your property with respect,
and that it will be in roughly the same state at the end of the tenancy
as it was at the start. You must properly vet potential tenants in order
to ensure that they will be able to pay the rent, and that their renting
history is good.

You may find that you require the services of a letting agent to help
you do this. They will be able to provide credit and reference checking
facilities, which you may find difficult to take care of on your own.

Poor property choices

The property you buy is one of the most important choices you will make
as a landlord. You should remember that expensive is not always better.
Make sure you do your research first; find out about average rents, the
type of tenants in the area and the general demand. Above all, don’t
overstretch yourself financially; if you take too big a mortgage you may
struggle to meet the repayments.

Many new buy-to-let landlords choose properties close to their homes.
While this may be convenient, you may also be able to find a more
suitable property by looking farther afield. That said, unless you
intend to use a property management firm or lettings
agent,
it is probably unwise to buy a rental property in Aberdeen if you live
in Southampton.

Over-reliance on lettings agents

Letting agents provide a range of useful services to landlords including
tenant vetting, rent collection and, in some cases, property management.
Many landlords could not do without them.

But for all their benefits, letting agents have some significant
drawbacks. Their services come at a cost; it is not uncommon for an
agent to charge in excess of £1,000 to find and vet a tenant.
Furthermore, it is a sad fact that there are many unscrupulous agents
out there. You should ensure that you do some research before making a
decision, find out upfront about their fees for things like contract
renewals and keep a tight rein on your agent’s expenses.

Not monitoring cashflow

As a landlord it is vital to remember that you are running a business,
and you should treat your finances as such. A worryingly large
proportion of landlords do not keep a close enough eye on their
cashflow, presuming that they are doing
enough if their rental income covers the mortgage.

You should keep detailed records of all income and expenditure and,
where possible, record it in a spreadsheet that enables you to view key
figures like profit and loss projections quickly. You should also review
the performance of each of your properties on an annual basis. This will
help you to make informed decisions about the make-up of your portfolio.

Skimping on the contract

The tenancy agreement is one of the most vital tools available to a
landlord. It outlines the terms of your relationship with tenants,
including when they will pay rent and under what circumstances the
tenancy can be ended.

Given the importance of this contract, it is concerning that so many
landlords skimp on it. A large number simply find a standard format
agreement online – or, perhaps worse, just write it themselves. Although
legal advice is not cheap, it is vital that you enlist professional help
when drafting a tenancy agreement. Despite the initial outlay this can
help to save you time, money and stress in the event of a disagreement
at a later date.

Being a landlord is not always easy, despite what some may think. But,
by learning from the mistakes of others and trying not to repeat them,
you can help to make your own property investment as easy and
stress-free as possible.